Note 7 - Pension Plans

12 Months Ended

Sep. 27, 2020

Pension Plan [Member]

Notes to Financial Statements

Retirement Benefits [Text Block]

7     PENSION PLANS

We have several non-contributory defined benefit pension plans that together cover selected employees. Benefits under the plans were generally based on salary and years of service. Effective in 2012 for Legacy Lee (as defined above), substantially all benefits are frozen and only a small amount of additional benefits are being accrued. Our liability and related expense for benefits under the plans are recorded over the service period of employees based upon annual actuarial calculations. Plan funding strategies are influenced by government regulations. Plan assets consist primarily of domestic and foreign corporate equity securities, government and corporate bonds, hedge fund investments, and cash.

In connection with the Transactions, we acquired four additional defined pension plans related to Buffalo News. The addition of these four plans significantly increased our benefit obligation in 2020.

The net periodic cost (benefit) components of our pension plans are as follows:

(Thousands of Dollars)	2020			2019			2018
Service cost for benefits earned during the year		1,361			36			48
Interest cost on projected benefit obligation		7,577			6,563			5,754
Expected return on plan assets		(12,986	)		(8,073	)		(7,933	)
Amortization of net loss		3,166			1,135			2,025
Amortization of prior service benefit		(6	)		(100	)		(136	)
Net periodic pension cost (benefit)		(888	)		(439	)		(242	)

Changes in benefit obligations and plan assets are as follows:

(Thousands of Dollars)	2020			2019
Benefit obligation, beginning of year		192,369			176,531
Business combination		195,834			—
Service cost		1,361			36
Interest cost		7,577			6,563
Actuarial loss (gain)		20,525			20,687
Benefits paid		(16,246	)		(11,448	)
Administrative expenses paid		(39	)		—
Benefit obligation, end of year		401,381			192,369
Fair value of plan assets, beginning of year:		146,999			151,255
Business combination		152,331			—
Actual return on plan assets		44,933			8,705
Benefits paid		(16,246	)		(11,448	)
Administrative expenses paid		(2,794	)		(2,163	)
Employer contributions		6,131			650
Fair value of plan assets, end of year		331,354			146,999
Funded status		(70,027	)		(45,370	)

Disaggregated amounts recognized in the Consolidated Balance Sheets are as follows:

	September 27			September 29
(Thousands of Dollars)	2020			2019
Pension obligations		(70,027	)		(45,370	)
Accumulated other comprehensive loss (before income taxes)		(41,344	)		(53,066	)

Amounts recognized in accumulated other comprehensive income (loss) are as follows:

	September 27			September 29
(Thousands of Dollars)	2020			2019
Unrecognized net actuarial loss	(41,344		)	(53,072		)
Unrecognized prior service benefit	-			6
		(41,344	)		(53,066	)

We expect to recognize $4,018,000 of unrecognized net actuarial loss, in net periodic pension cost in 2021.

The accumulated benefit obligation for the plans total $401,381,000 at  September 27, 2020 and $192,369,000 at September 29, 2019. The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for the pension plans with accumulated benefit obligations in excess of plan assets are $401,381,000, $401,381,000 and $331,354,000, respectively, at  September 27, 2020.

Assumptions

Weighted-average assumptions used to determine benefit obligations are as follows:

	September 27	September 29
(Percent)	2020	2019
Discount rate	2.8	3.1

Weighted-average assumptions used to determine net periodic benefit cost are as follows:

(Percent)	2020	2019	2018
Discount rate - service cost	3.3	4.2	3.7
Discount rate - interest cost	2.6	3.9	3.1
Expected long-term return on plan assets	6.0	5.5	5.5

For 2020, the expected long-term return on plan assets is 6.0%. The assumptions related to the expected long-term return on plan assets are developed through an analysis of historical market returns, current market conditions and composition of plan assets.

Plan Assets

The primary objective of our investment strategy is to satisfy our pension obligations at a reasonable cost. Assets are actively invested to balance real growth of capital through appreciation, reinvestment of dividend and interest income, and safety of invested funds. 

Our investment policy outlines the governance structure for decision making, sets investment objectives and restrictions and establishes criteria for selecting and evaluating investment managers. The use of derivatives is prohibited, except on a case-by-case basis where the manager has a proven capability, and only to hedge quantifiable risks such as exposure to foreign currencies. An investment committee, consisting of certain of our executives and supported by independent consultants, is responsible for monitoring compliance with the investment policy. Assets are periodically redistributed to maintain the appropriate policy allocation.

The weighted-average asset allocation of our pension assets is as follows:

(Percent)	Policy Allocation		Actual Allocation
	September 27	September 27		September 29
Asset Class	2020	2020		2019
Equity securities	50	48		49
Debt securities	35	33		34
TIPS	5	5		5
Hedge fund investments	10	10		10
Cash and cash equivalents	—	4		2

Plan assets include no Company securities. Assets include cash and cash equivalents and receivables from time to time due to the need to reallocate assets within policy guidelines. Buffalo News assets are excluded from the table above as we are still converting their asset allocation from their previous policy to align with Legacy Lee. Buffalo news asset allocation consists of 92% equity securities, 2% debt securities, and 6% of cash and equivalents. As of September 27, 2020 Buffalo News had no policy for asset allocation.

Fair Value Measurements

The fair value hierarchy of pension assets at  September 27, 2020 is as follows:

(Thousands of Dollars)	NAV	Level 1	Level 2	Level 3
Cash and cash equivalents	—	17,287	—	—
Domestic equity securities	5,500	151,584	60,333	—
International equity securities	—	6,893	7,396	—
Emerging equity securities	—	7,225	—	—
TIPS	—	6,967	—	—
Debt securities	—	22,253	32,167	—
Hedge fund investments	15,977	—	—	—

The fair value hierarchy of pension assets at  September 29, 2019 is as follows:

(Thousands of Dollars)	NAV		Level 1		Level 2		Level 3
Cash and cash equivalents		—		2,970		—		—
Domestic equity securities		9,524		8,971		40,593		—
International equity securities		—		6,525		7,283		—
TIPS		—		6,918		—		—
Debt securities		—		26,392		24,190		—
Hedge fund investments		15,733		—		—		—

There were no purchases, sales or transfers of assets classified as Level 3 in 2020 or 2019. Pension assets included in the fair value hierarchy at net asset value, or "NAV", include three investments:

•   U.S. small cap value equity common/collective fund for which fund prices are not publicly available. The balance of this investment is $5,500,000 and $9,524,000 as of September 27, 2020 and September 29, 2019, respectively. We can redeem this fund on a monthly basis.  

•     Global equity long/short common/collective hedge fund-of-funds for which fund prices are established on a monthly basis. The balance of this investment is $7,096,000 and $7,923,000 as of September 27, 2020 and September 29, 2019, respectively. We can redeem up to 90% of our investment in this fund within 90-120 days of notice with the remaining distributed following completion of the audit of the Fund's financial statements for the year.  

•   Global equity long/short common/collective hedge fund-of-funds for which fund prices are established on a monthly basis. The balance of this investment is $8,881,000 and $7,810,000 as of September 27, 2020 and September 29, 2019, respectively. We can redeem up to 50% of our investment in this fund twice per year.

Cash Flows

Based on our forecast at September 27, 2020, we expect to make contributions of $3,190,000 to our pension trust in 2021.

We anticipate future benefit payments to be paid from the pension trust as follows:

(Thousands of Dollars)
2021	22,881
2022	22,385
2023	22,548
2024	22,630
2025	22,511
2026-2030	109,885

Other Plans

We are obligated under an unfunded plan to provide fixed retirement payments to certain former employees. The plan is frozen and no additional benefits are being accrued. The accrued liability under the plan is $1,483,000 and $1,667,000 at September 27, 2020 and September 29, 2019, respectively.